Posts Tagged ‘It is Bush’s fault’

This is the second part about USA. Again, It ain’t pretty to say the least!

Where the same absurd Alice in Wonderland economic and political farce is playing out in the USA. And as in Europe it is, as usual, the common people who are paying the price.

And as in Europe, the US crisis is anything but over regardless of what the political elites are trying to tell the people in USA. In USA the role of ECB is played by the FED (the Federal Reserve), which creates money out of “thin air” to support the gigantic and increasing debt. And to keep the stock market going and lower the price of the dollar.

So that the federal US government can spend your tax money like a drunken sailor.

In USA, Goldman Sachs and the other investment banks, plus the big Hedge Funds, are pushing leverage to ridiculous and dangerous extremes.

If you read the Comptroller of the Currency, Administrator of National Banks, report for the second quarter 2012 “Quarterly Report on Bank Trading and Derivatives Activities”, you get utterly horrified of the totals of the open derivatives positions in the US market.

Four of the largest U.S. banks are walking an extreme tightrope of risk, leverage and debt when it comes to derivatives. Below you are going to find just how utterly exposed they are.

But first what is leverage?

Most people do not understand “leverage” and what it actually means. If they did, they would not sleep at night knowing what’s going on right now.

To put it simple: leverage means that these banks etc use a leverage of say 1:50 or 1:100 in their speculations. Which means that they only put up 1 of their own dollars for an investment worth 50 or 100 dollar. Their dollars are “worth” 50 or 100 times more than they actually are.

It ALSO means that IF “things” goes wrong way they LOSE 50 or 100 dollars for every dollar they invested in that trade or position. Or much, much more.

And usually when things goes wrong, it goes very fast when it comes to trading with these kind of leverages. So very quickly, these sums get astronomical. In a couple of days they can literally lose ALL their capital and more.

This has happened time and time again. Just to mention a few:

– Lehman Brothers (was the 4th largest inv. bank in the US).

– Bear Stearns

– American International Group

– Northern Rock (a medium-sized British bank)

– Washington Mutual

– American Savings and Loan

– Landsbanki and Glitnir

– Barings Bank

– Société Générale

– JP Morgan Chase & Co

– Morgan Stanley

– Long-Term Capital Management L.P. (LTCM)

As I said before, this is JUST A VERY SHORT LIST

This would not per se be a problem if this were a truly free and capitalist market. Because then these banks would go bankrupt and the owners and investors would lose their money. As they are supposed to do if the do bad business or trades.

But as we all know,this is NOT a free and capitalist market. Our “dear” politicians have “decided” that these banks with all their wild speculations are too important or to big, to be allowed to fail.

So instead, they have used taxpayer’s money and put whole countries at risk and in extreme debt just to bail out these banks.

And the banks knows that whatever speculations they do, REGARDLESS of how much or bad they speculate, and as you can see below their speculations are horrific, the politicians are going to bail them out with our tax money.

JP Morgan Chase

Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)

Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)

Citibank

Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)

Bank Of America

Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)

Goldman Sachs

Total Assets: $114,693,000,000 (a bit more than 114 billion dollars)

Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)

To sum up – TOTAL EXPOSURE TO DERIVATES for ONLY these four banks:

207, 375, 086, 000, 000 TRILLION DOLLARS!!!!!!!!!!!

TOTAL ASSETS for these four banks: 4,720,464,000,000TRILLION DOLLARS

So they can “cover” 2,27 % of the Total Exposure with ALL their Assets!

So who is going to pay for the “rest”: 202, 654, 622, 000, 000 TRILLION DOLLARS!!!!!!!!!!! if anything goes wrong?

Well, we know the answer to that doesn’t we. So far, it’s the common people, i.e. the taxpayers, who had to cover for all the banks bad speculations thanks to our dear politicians.

Take another look at those figures for Goldman Sachs. If you do the math, Goldman Sachs has total exposure to derivatives contracts that is more than 364 times greaterthan their total assets!

That is utter insanity, but everyone just keeps pretending that the emperor actually has clothes on.

And why are “our” politicians SO EAGER to protect these speculators?

To put these GIGANTIC sums into perspective lets compare with the GDP from USA and all of EU from 2011

There a lot of different way to calculate GDP and the figures for each year. Add to that exchange fluctuations, conversion rates etc. So the figures below comes from the same source (IMF) to make the comparison easier. And it is their conversion.

GDP USA 2011 – 15,094,025 billion US dollars

GDP EU 2011 – 17,610,826 billion US dollars

Total GDP for EU and USA 2011: 32,704,851 billion US dollars.

Lets compare these 32,704,851 billion US dollars with TOTAL EXPOSURE TO DERIVATES for these four above mentioned banks:

207, 375, 086, 000, 000 TRILLION DOLLARS!!!!!!!!!!!

VS

32,704,851 billion US dollars in COMBINED GDP of EU and USA

Anyone see any problem???

Problem solved all right. So just move on, nothing to notice here or worry about.

Because according to out “dear” politicians, bankers and political elites from EU and USA there is NO SERIOUS PROBLEM HERE. The problems in USA and EU are more or less solved etc.

So the ones that put as in the mess in the first place, very “reassuringly” tells us: “We take care of it”.

Yeah sure!

Let’s move on to another “bright spot” –the federal budget and debt. The figures are based on the 2012/2013 data:

2012 US Tax Revenue: $2,469,000,000,000

2012 Federal budget: $3,796,000,000,000

2012 Budget deficit: $1,327,000,000,000

US Federal Debt as of January 22, 2013: $16,471,084,067,491

Total interest paid on the debt in 2012: $359,796,008,919

Budget INCREASE between 2012 and 2013: $38,500,000,000

To make these gigantic sums understandable here is how these figures would look like for a “normal” family:

Annual family income: $24,690

Annual family expenses: $37,960. 154%of the annual family income.

Annual family shortfall borrowed from friends/neighbors etc: $13,270. 54%of the annual family income.

Total interest the family paid last year: $3,598 (at near 0% interest). Nearly 15% of the annual family income

Total family debt (mortgage, auto, credit card): $164,471.This is 666% of the annual family income.

Change in family spending this year: an increase of $385

This looks like a very responsible family wouldn’t you say?

And do you think this family would get any loans from the banks?

When you look at it this way, it really seems absurd. Yet it’s true… a slow motion train wreck. That any person with more than one functioning brain cell can see coming miles away. Except our “dear” politicians. They are in ACTUAL FACT increasing the spending AND the debt.

Here’s another way to look at the debt ceiling I found in a paper. It’s very symptomatic:

Let’s say you come home from work and find there has been a sewer backup in your neighborhood… and your home has sewage all the way up to your ceilings.

What do you think you should do?

Raise the ceilings, or remove the crap?

Well, or “dear” politicians are franticly at an increasing speed trying to raise the ceiling at the same time as the “sewage” is increasing EVEN MORE.

Yeap, there you have politicians in a nutshell.

Why fix the problem that they themselves caused, when the politicians can pretend that they are the giver of all gods and bearer of all gifts to all the people all the time.

And it doesn’t cost anything for anybody. It’s ALL free forever. And they all lived happily ever after.

It is a very sad day indeed to see a people voluntarily decide to throw themselves and their country over the cliff.

Let’s look at the economy (the figures are from the Congressional Budget Office):

In the Fiscal Year 2011, the federal government collected $2.303 trillion in tax revenue. Interest on the debt that year totaled$454.4 billion, and mandatory spending totaled $2,025 billion. In sum, mandatory spending plus debt interest totaled $2.479 trillion –. exceeding total revenue by $176.4 billion.

(Mandatory spending includes entitlements like Medicare, Social Security etc. which are REQUIRED by law to be paid. Congress in practical terms do not see this money, it is automatically deducted.)

For the Fiscal Year 2012, which just ended 37 days ago, that deficit increased 43% to$251.8 billion.

In other words, they could cut the entire Federal Government’s discretionary budget – No military, SEC, FBI, EPA, DHS, IRS, etc.- and they would still be in deficit by a quarter of a trillion dollars.

(Discretionary spending includes nearly everything we think of related to government- the US military, the Department of Homeland Security, IRS, EPA etc.)

The only thing showing any growth in the US, besides the debilitating regulatory burdens, is the national debt. It took over 200 years for the US government to accumulate its first trillion dollars in debt. It took just 286 days to accumulate the most recent trillion (to $16 trillion).

Last month alone, the first month of Fiscal Year 2013, the US government accumulated nearly $200 billion in new debtin just 31 days.

And the numbers will only continue to get worse. 10,000 people each day begin receiving mandatory entitlements. Fewer people remain behind to pay into the system. The debt keeps rising, and interest payments will continue to rise even more. In addition, the dollar is going to decline.

The result, the US government is legally bound to spend more money on mandatory entitlements and interest than it can raise in tax revenue. It will not make any difference how high the federal, state or local government raise taxes, or even if they cut everything.

Another effect of Obama economics is that the poor are getting poorer, especially the black. Under Obama the poorest Americans has suffered the single largest drop in income ever.

And the Black Americans in the same lowest income quintile have suffered almost double as the average American in the same quintile under Obama:

The drop is– 11.58% in one year(2010) and is at the lowest level ever.

That’s what I call “change”!But I would not call it “hope”.

And the number of people classified as poor are getting larger and larger.

Then on top of that, we have the equally disastrous foreign policy. Where the Obama administration systematically have thrown their former allies (Eastern Europe, Britain, Israel, Egypt, Saudi Arabia etc) under the bus, and helped parties like the Muslim Brotherhood that hate everything that USA and the western world stands for, to power.

See my 19 posts on Syria etc as some examples of that disastrous foreign policy:

But as the old saying goes (Joseph de Maistre in a letter from St Petersburg August 1811): a country has the politicians/government that they deserve. So enjoy!

In addition, this quote from a reader’s commentary in The Prager Zeitung in March 2010 (translated from Czech) sums it up quite well really:

“Multitude of Fools

The danger to America is not Barack Obama but a citizenry capable of entrusting a man like him with the Presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president.

The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America. Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The Republic can survive a Barack Obama, who is, after all, merely a fool.

It is less likely to survive a multitude of fools such as those who made him their president.“

P.S. If you are wondering about the title, see this video with music by Spike Jones. There is another long story behind the lyrics but that you have to find out yourself. D.S.

And then let’s have a lock at Black Americans in the same lowest income quintile.

They have suffered almost double as the average American in the same quintile under Obama:

The drop is– 11.58% in one year (2010) and is at the lowest level ever.

That’s what I call “change”!But I wouldn’t call it “hope”.

Some other highlights in the name of hope and change:

– Median household money income for the nation was $49,400 in 2010, adecline of 2.3 percent from 2009, in real terms.

– The 2010 official poverty rate for the nation was 15.1 percent, up from 14.3 percent in 2009, with 46.2 million people in poverty, an increase of 2.6 million since 2009. The highest percentage since 1993 (15.1%) and 1982 (15.2%), and the largest number in the 52 years for which poverty estimates have been published.

– The 2010 official poverty rate for blacks was 27.4 percent, up from 25.8 percent in 2009, with 10.7 million people in poverty, an increase of 731 000 since 2009. The highest percentage since 1996 (28.4%), and the largest number in 17 years.

– The decline of Real Median Household Income among the15 to 24 years was – 9.3%.

Are you extremists?

Obama had three pillars that swept him to power – huge turnout among young (under 30), Hispanics and Blacks. Now the young and Hispanics are gone, down to 43-44% as the rest of the population. So he is toast.

But the blacks are still overwhelmingly behind Obama (around 81%).

The obvious question is why? Since under Obamas “eminent leadership” they have had the biggest drop in income and living standard ever. Not to mention skyrocketing unemployment.

With so much “hope” and “change”, I guess that’s why he is so “popular”.

____________________________________________

A quick update on September 27 to my post:

I wrote:

“Obama had three pillars that swept him to power – huge turnout among young (under 30), Hispanics and Blacks. Now the young and Hispanics are gone, down to 43-44% as the rest of the population. So he is toast.

But the blacks are still overwhelmingly behind Obama (around 81%).

The obvious question is why? Since under Obamas “eminent leadership” they have had the biggest drop in income and living standard ever. Not to mention skyrocketing unemployment.

With so much “hope” and “change”, I guess that’s why he is so “popular”.

Well, it seems that the blacks have started catching on because now Obama is losing the blacks too in a BIG Way

According to a Washington Post/ABC News survey, his favorability rating among blacks has dropped off a cliff, plunging from 83 percent five months ago to a mere 58 percent today –a drop of 25 points!

In the election of 2008, he was able to increase black’s participation from 11 percent of the total vote in 2004 to 14 percent. And he carried 98 percent of them.

Way to go Obama!

Click on the graphs for a larger image

Jobb aproval economy

State of the country

Some more revealing graphs of Obama economics

This graph shows the job losses from the start of the employment recession, in percentage terms – this time from the start of the recession. This is by far the worst post WWII employment recession.

This graph shows the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers). A very high level.

This graph shows the number of workers unemployed for 27 weeks or more. The level is extremely high.